After yesterday’s statement from the Federal Reserve, the economic reports came fast and furious.
The gloomiest report of the week was by far the Philadelphia Fed’s announcement that manufacturing in third district (Pennsylvania, Delaware and parts of New Jersey) fell to its lowest level since last August. This is the second straight month that the regional index has fallen; this time around it was dragged down by flagging new orders and shipments. The silver lining is that this only covers manufacturing in the Northeastern pocket of the U.S. At the national level, there are still bright spots in the manufacturing sector, but there is no doubt that the third district is struggling.
Then there was the Labor Department’s weekly report on initial claims for unemployment. Last week, jobless claims fell by 2,000 but still remained at 387,000. Meanwhile, economists expected claims to fall to 380,000. The latest data has brought the four-week moving average up to a six-month high. To provide some context, if jobless claims increase above 400,000 the labor market is considered to be contracting.
Thankfully, we received some good news today as well. First, on the housing front, average home prices climbed in May. Since May 2011, prices have climbed 7.9% to $182,600. There are fewer distressed homes on the market and an influx of first-time buyers is making the buying market more competitive. Now, existing home sales did fall for the first time in a year, but even with the drop sales have increased 10% over a year ago. This report followed on the heels of the announcement that home building permits surged to the highest level since 2008! In May, homebuilders applied for 780,000 permits, far outpacing the 720,000 consensus estimate.
Finally, we received a favorable May reading for the index of leading economic indicators. The index, which is a measure for future U.S. economic activity, jumped 0.3% to the highest level in three years. This represents a turnaround from April, when the index dipped 0.1% and also topped economists’ forecasts that the index would remain flat. Last month, seven of the 10 economic components increased, most notably building permits and new manufacturing orders.
Next week is going to be a telling week for the state of the U.S. economy—we have no fewer than seven market-moving reports scheduled then! This includes Monday’s report on new home sales, Tuesday’s report on consumer confidence and Wednesday’s report on Durable orders. Then on Thursday we’ll receive the next report on jobless claims, but most importantly, the third estimate for Gross Domestic Product. Then on Friday we’ll wrap up the week with a personal income report and finally the University of Michigan’s consumer sentiment index.
Be sure to get the news first by staying tuned to my daily blog!